Conservation & Donation
What is conservation of land?
Conservation of land is a voluntary and legally binding agreement between a landowner and a land trust or government agency.
When a landowner donates the property to a land trust or public agency, he or she is giving away some of the rights associated with the land. The easement permanently limits uses of the donated parcel in order to protect its conservation values, as specified in the Internal Revenue Code (IRC) 170(h).
Conservation of property offer private landowners flexibility in protecting their land. For example, a donating landowner can retain the right to grow crops on a parcel while, at the same time, relinquishing the right to build additional structures on the parcel.
The land trust is responsible for making sure that a landowner adheres to the conservation terms of the easement. An easement may apply to all or a portion of the property and may or may not allow for public access to the property. A landowner who has donated a conservation easement can sell the land or pass it on to heirs, and future owners of the property are bound by the terms of the easement.
According to The Land Trust Alliance, a national land conservation organization working to save the places people love by strengthening land conservation across America, today released a comprehensive report showing land trusts across the nation have conserved a staggering 56 million acres, an area of protected land that is double the size of all the land in national parks across the lower 48 states. The permanent conservation easement tax incentive enacted by Congress in 2015 with enhanced federal tax incentives has been the most significant factor in conserving land in the United States.
Conservation tax deduction
Donating conserved easement provides the following federal tax benefits, as set forth in 26 U.S. Code § 170:
- The value of the donation of a conservation easement is considered a charitable deduction for income tax purposes. The deduction is up to 50% of the donor’s charitable contribution base (adjusted gross income, less net operating loss carryback) for the taxable year. Any excess amount may be carried over for up to 15 years, subject to the same AGI limitation.
- If the donor is in the business of farming and ranching, they may deduct up to 100% of their charitable contribution base.
- Deductions may be utilized by individuals and members of qualifying pass-through entities, including S-corporations, partnerships and LLCs. They are not, however, available to publicly traded companies.
Will donors who use this provision be audited by the IRS?
The IRS has been very active in auditing abusive partnerships within this space. All donors should note that the IRS does pay attention to donations of property that are high in value, including donations of a conservation easement.
This makes it important for donors and their advisors to know and follow the law and conduct thorough due-diligence, utilize a reputable, professional, and licensed appraiser who has experience in the appraisal of conservation easements and donates to a well-established, reputable land trust conservancy that has adopted and implemented Land Trust Standards and Practices. InVia’s due-diligence in this area is like no other ensuring sustainability and protection of the land and the intent of our clients.